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RioZim seeks US$200m

MINING concern RioZim is going on an aggressive capital-raising exercise to secure more than US$200 million over the next year, amid plans to list one of its subsidiaries, Rio Gold, on one of the international stock exchanges, possibly London or Hong Kong, businessdigest can reveal.
New RioZim chairman, Harpal Randhawa said Rio Gold was in discussion with a number of other local gold companies to consolidate assets and build a company with a critical mass of production assets, advanced stage projects and blue-sky potential. It is this company that would seek a listing on international bourses in order to raise US$100 to US$150 million for expansion projects.
The group has also mandated Afreximbank to arrange a US$75 million three-year syndicated facility to refinance bilateral agreements of around US$50 million and to provide growth capital of US$25 million for operations and projects. If successful, this would be Zimbabwe’s second internationally-syndicated loan facility after Econet’s.
“The plan is to use US$50 million of the new facility to refinance existing debt on considerably more favoruable terms, and the balance to fund growth opportunities. An additional US$5 million from the facility will be used for immediate capital expenditure and working capital requirements,” said Randhawa.
He said he expects Rio Zim to be debt free by next year, following initiatives the group has taken since its rights issue in March. RioZim owed banks and suppliers more than US$60 million, but this should come down to US$42 million at the end of June.
The original principal debt to the banks was US$30 million and about US$25 million was owing to suppliers. The costs ranged from between 12-126%, with the average at around 50%.
Randhawa said the group had repaid US$17 million of the original bank debt and was working on refinancing with cheaper debt to get the average cost down to 12%. Debts were being serviced on a monthly basis.
RioZim held a rights issue and private placement in March which resulted in US$11,6 million immediate cash inflow into the company while the drawdown of the convertible debentures is to provide the company with access to a further US$45 million over a period of five years for its future funding requirements.
Prior to this cash injection, RioZim had been struggling to meet its repayment obligations through a combination of expensive debt, which had snowballed, and also underperformed. Lack of cash flow for working capital and critical capital expenditure exacerbated operational challenges and the RioZim lenders had made an application for judicial management, which was staved off by the capital raising exercise.
Randhawa added that the goal of the company was to raise additional capital either through debt or through equity to bring its projects to fruition. It was because of the constraints in raising capital locally while maintaining the indigenous status of the company that capital-raising would be done at subsidiary company level.
The group will create sub-units — Rio Gold, which will own Renco, Cam and Motor Mines, and all other group gold assets; Rio Base Metals, which will own Empress Nickel Refinery and all related base metal assets; Rio Diamonds, which will own Murowa and all other related diamond assets; Rio Energy, which will own Sengwa Colliery assets including a potential power plant; and Rio Chrome, which will own 60% of RM Enterprises and all related chrome assets.
Randhawa said the goal was to maintain the shareholding in RioZim at a level that always ensured it meets legal requirements on indigenisation.
In turn, RioZim will maintain a holding of at least 51% in each of its subsidiaries to ensure their indigenous status, while utilising the available 49% scrip in the subsidiaries to raise capital, acquire assets or source expertise.
Randhawa also said the group had finally terminated the toll refining agreement with Centametall, which was largely responsible for the losses the group had been having earlier and would soon publish a notice to hold its annual general meeting. — Staff Writer.